Canada posts strong July housing starts, led by British Columbia

Reuters Staff

3 Min Read

OTTAWA/TORONTO (Reuters) - Canadian housing starts rose in July on growth in western British Columbia, even as groundbreaking on single-detached homes fell in Toronto where activity has cooled after the province introduced measures to rein in a frothy market.

Houses under construction are seen at a subdivision near the town of Kleinburg, Ontario, Canada May 13, 2017. REUTERS/Chris Helgren

The seasonally adjusted annual rate of starts rose to 222,324 units in July, the Canada Mortgage and Housing Corporation (CMHC) said on Wednesday, topping economists’ expectations for 205,000. June’s figures were revised up to 212,948.

Although parts of Canada’s housing market have started to cool, homebuilding has remained solid and the six-month average for housing starts rose to 217,550 on increased activity in the provinces of British Columbia and Alberta.

“Housing starts aren’t showing many signs of cooling down this summer,” CIBC economist Andrew Grantham said in a note to clients.

The housing market continues to surprise economists who had predicted residential construction will become a drag on economic growth before the end of the year, Grantham said.

Seasonally adjusted starts jumped 20 percent in British Columbia, lifted by the multi-family segment. That increase came as the number of completed and unsold homes has hovered near a record low in recent months, CMHC’s chief economist Bob Dugan said.

The strong increase in starts for semi-detached and town homes in the city suggest affordability concerns are driving demand for less expensive housing types, the CMHC report said.

Toronto home sales have declined for four consecutive months since the provincial government took steps to try to rein in the housing market, including imposing a foreign buyers tax.

As there can be a long lag between demand and new construction, the slowdown in sales in Ontario will have a greater impact on starts next year, Grantham said.

Separate data from Statistics Canada showed the value of Canadian building permits unexpectedly rose in June on increased plans for commercial buildings, though construction intentions for single-family homes decreased.

The 2.5 percent increase exceeded economists’ forecasts for a decline of 2.0 percent. For the second quarter, building permits rose 10.4 percent compared with the year before, the biggest increase since the third quarter of 2012.

Reporting by Leah Schnurr in Ottawa and Alastair Sharp in Toronto; Editing by Jim Finkle and Meredith Mazzilli